Kooyman v. Farm Bureau Mut. Ins. Co.

• Decision Date: 28 June 1978
• Docket Number: No. 60608,60608
• Citation: 267 N.W.2d 403
• Parties: Kathryn Lynn KOOYMAN, a minor, by D. Frank Kooyman, her Conservator and father and next friend, D. Frank Kooyman, Individually, and Jane Kooyman, Appellants, v. FARM BUREAU MUTUAL INSURANCE COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 403

267 N.W.2d 403

Kathryn Lynn KOOYMAN, a minor, by D. Frank Kooyman, her Conservator and father and next friend, D. Frank Kooyman, Individually, and Jane Kooyman, Appellants, v. FARM BUREAU MUTUAL INSURANCE COMPANY, Appellee.

No. 60608.

Supreme Court of Iowa.

June 28, 1978.

Huscher & Rittgers, Des Moines, for appellants.

Blanchard, Cless & Hanson, Des Moines, for appellee.

Considered by MOORE, C. J., and RAWLINGS, LeGRAND, REES and HARRIS, JJ.

REES, Justice.

This is an appeal by Kathryn Lynn Kooyman, her conservator and her parents from an order of the trial court dismissing their petition and for damages for failure to state a cause of action. We reverse in part, affirm in part and remand for further proceedings.

Plaintiff Kathryn Kooyman, a minor, was injured when she was struck by an automobile operated by Wilmer J. Van Wyk, defendant's insured. The plaintiffs instituted an action alleging the fact that Kathryn had been struck by an automobile operated by Van Wyk as she started across a public street to board a school bus. Joined as defendants in said action were the Des Moines Independent Community School District as owner of the school bus and John Brown as driver thereof. As trial was about to commence, in fact, during the process of drawing the jury, the Des Moines School District and John Brown settled their tort liability with the plaintiffs for the sum of $500,000 and the case continued to trial against Van Wyk alone, which resulted in a verdict in plaintiffs' favor in the aggregate sum of $600,000. Van Wyk was insured and covered by the defendant Farm Bureau Mutual Insurance Company (hereinafter Farm Bureau) for the sum of $25,000 for injury to one person. Following the entry of the verdict, Farm Bureau paid into court the sum of $25,000, together with interest and court costs, which it claimed discharged its policy obligations. Execution was issued against Van Wyk and levy made on his property, resulting in a collection of $14,285.64, less $247.07 costs. Van Wyk then assigned to the plaintiffs any and all claims and rights of whatsoever kind and nature which Van Wyk had or might have against the defendant Farm Bureau.

Plaintiffs then instituted the instant action against Farm Bureau by filing their petition in four divisions. Each of the divisions contained allegations that on April 27, 1973 Kathryn Lynn Kooyman was injured when she was struck by an automobile driven by Van Wyk who was insured by Farm Bureau; that Kathryn's injuries included the severance of her spinal cord, resulting in permanent and complete paralysis of the body from the chest to the lower extremities. Each division further recited that in the trial court a suit had been filed by the plaintiffs seeking to recover the sum of $4,000,000 against Van Wyk, Des Moines Independent Community School District and John Brown, and that the Des Moines Independent School District and Brown had settled with the plaintiffs for the sum of $500,000. The petition further alleged that on the trial of the case judgment was rendered against Van Wyk for the sum of $600,000. Plaintiffs further alleged Farm Bureau had tendered into court the sum of $25,000 with interest toward the payment of said judgment.

Division I of plaintiffs' petition was brought under the provisions of § 516.1, The Code, and asserted Farm Bureau had been guilty of bad faith in its refusal to negotiate and settle plaintiffs' claim against Van Wyk. In division II of their petition, plaintiffs alleged Farm Bureau was negligent in failing to provide adequate counsel to investigate plaintiffs' claims and defenses available in the case; to adequately prepare for trial; to seriously evaluate plaintiffs' damage and the potential verdict therefor; to negotiate in good faith the settlement of the case; to advise Van Wyk of his right to hire his own counsel and of the fact Farm Bureau was defending him at a minimum expense because of the comparatively low limits of his policy; and to inform Van Wyk that Farm Bureau did not intend to fully defend him.

Division III of the petition asserted the same matter as was pleaded in division I, but based the claim therein on the assignment of rights running in favor of plaintiffs obtained from Van Wyk. Division IV raised the same matter as was pleaded in division II, based however on the Van Wyk assignment.

On October 28, 1976 defendant filed several motions: (1) a motion to dismiss all four divisions of the petition on the ground no allegation was made therein that plaintiffs would have settled within the policy limits of $25,000; (2) to dismiss the two divisions alleged to have been brought under the provisions of § 516.1, The Code, since said section afforded the plaintiffs only the rights of the insured Van Wyk, and that Van Wyk's rights had been extinguished by the payment into court by Farm Bureau of an amount equal to the limits of the policy; (3) a motion for more specific statement to require plaintiffs to plead the amount each plaintiff was seeking, and whether plaintiffs ever offered to settle within the policy limits in addition to the amount which could have been recovered from Van Wyk personally, and generally to make the pleading more specific; (4) a motion to strike irrelevant and immaterial matter; and (5) a motion to require plaintiffs to recast their petition into a concise, single document.

Plaintiffs resisted all of said motions, claiming that each division of their petition set out a claim for relief in conformity with rule 69, Rules of Civil Procedure. They resisted the motion to dismiss the two divisions of the petition brought under the provisions of § 516.1 on the ground that said section does not restrict recovery to policy limits where bad faith on the part of the company is alleged. The plaintiffs resisted the motion for more specific statement on the ground the motion sought the pleading of evidentiary matter which was available to defendant by way of discovery. Plaintiffs resisted the motions to strike and to recast the pleadings by asserting generally the motions were not meritorious.

Plaintiffs subsequently amended their petition following which Farm Bureau renewed its motions. After hearing, the trial court entered its ruling, holding that the motion to dismiss divisions I and II which were brought in conformity with § 516.1 was without merit on the basis of our holding in Trask v. Iowa Kemper Mutual Insurance Company, 248 N.W.2d 97 (Iowa 1977), in which we held § 516.1 should be construed as statutorily assigning the rights of an insured to an unsatisfied judgment creditor, i. e., the plaintiffs in this case. While the trial court overruled the motions for more specific statement and to strike and to recast the pleadings, it sustained Farm Bureau's motion to dismiss the entire petition on the ground plaintiffs had not alleged an offer on their part to settle the case for an amount equal to or less than the policy limits, plus any amount recovered from Van Wyk personally, and so had no basis to allege bad faith on the part of Farm Bureau. The trial court further held the allegations of divisions II and IV of plaintiffs' petition asserting Farm Bureau was negligent in conducting the defense of the insured did not constitute the pleading of a viable cause of action since negligence, unaccompanied by bad faith, cannot form the basis of a maintainable suit.

Plaintiffs state the following issues for review:

(1) That trial court erred in determining a claim for the amount of an original judgment against an insured in excess of the limits of a policy of insurance brought against an insurance carrier based on alleged bad faith in conducting settlement negotiations and the defense of the insured must embrace an allegation that a demand for settlement had been made within the policy limits in order to state a claim for relief in compliance with rule 69, Rules of Civil...